Every audit season follows a familiar pattern. The engagement letter goes out, the fieldwork date gets set and then, sometime in week two, someone is digging through a shared drive looking for a grant agreement no one has opened since it was signed. Deadlines slip. Fees creep up. Board members start asking why.

The scramble is rarely caused by bad accounting. It’s caused by treating the audit as an event instead of a byproduct of how the organization operates the other 11 months of the year. Here’s how CPAs can help nonprofit clients — or their own organizations — close that gap:

Start With the Right Question: Which Audit and When?

Not every nonprofit needs an audit, and the thresholds have moved. Confirm annually where the organization actually stands:

• New Jersey charitable registration: Organizations with gross revenue in excess of $1 million in monetary donations must file audited financial statements with their annual registration. The New Jersey Center for Nonprofits has a plain-language summary of the 2022 change, which also excluded certain mission-related in-kind donations from the calculation.
• Federal single audit: The Uniform Guidance threshold rose from $750,000 to $1 million in federal expenditures, effective for fiscal years beginning on or after Oct. 1, 2024. New Jersey’s Treasury Circular 25-12-OMB applies the same $1 million trigger to state financial assistance.
• Everything else: Bylaws, loan covenants, grantor agreements and funder requirements often impose an audit obligation regardless of the statutory thresholds. Read them.

Falling below a threshold isn’t the same as being off the hook. Grantors still audit programs, and boards still want assurance.

Build the Monthly Habits

Most audit friction comes from a handful of tasks that are easy in month one and painful in month 13:

• Reconcile every bank, investment and credit card account within 30 days of month-end — and have someone other than the preparer review it.
• Record restricted contributions with their restrictions at the time of the gift, not at year-end. Keep the award letter attached to the entry.
• Save grant agreements, amendments and award notices in one place with a consistent naming convention.
• Log board and committee minutes as they’re approved rather than reconstructing them in March.
• Track fixed asset additions and disposals as they happen, including anything funded with federal dollars.

Use the Quarters for the Judgment Calls

Quarterly is the right cadence for the items that require thought:

• Review the functional expense allocation methodology and document any change in how it was applied.
• Revisit revenue recognition on new grants: is this a contribution, a conditional contribution or an exchange transaction? Decide when the agreement is signed.
• Update the schedule of expenditures of federal awards (SEFA) as expenditures occur. Reconstructing a SEFA after year-end is where single audits go sideways.
• Confirm the organization’s registration, Form 990 and state filings are current.

Ninety Days Out

• Ask the auditor for the prior year’s prepared-by-client list and start it early. Assign each item an owner and a due date.
• Clear prior-year adjusting entries and management letter comments, then be ready to say what changed.
• Draft the footnotes in-house. Even a rough draft moves the timeline meaningfully.
• Brief the board’s audit or finance committee before fieldwork so they aren’t hearing about issues for the first time in the exit conference.

The Real Benefit

Year-round readiness produces a faster audit and a lower fee, which is what most clients notice first. The larger benefit is that the same discipline gives leadership reliable numbers in month four rather than month 14 — when the information can still change a decision. 

An audit should confirm what the organization already knows. When it becomes a discovery process, that’s the finding worth acting on.